Last week brought news of a Lancaster energy company facing a fraud investigation and three Pennsylvania banks reporting multimillion-dollar losses. Here’s what we know as of Monday morning.
Worley & Obetz
Penn Township-based Worley & Obetz Inc. is being investigated for fraud by the Federal Bureau of Investigation along with the Lancaster County district attorney’s office and Northern Lancaster County Regional Police, LNP reported.
Few details of the investigation are available.
“The investigators are not revealing their progress, which they say will take weeks at least, but we are confident justice will be served,” the company said last Thursday in a Facebook post.
The investigation is not the only trouble the company is facing.
Last month Worley & Obetz laid off 105 people, the post said.
“Our remaining team, our customers and even many of the unfortunate people who were laid off – even though none of them did anything except work very hard and provide great service to customers – have been incredibly supportive. It is both a humiliating and inspiring event. But it is an event that will pass, and we will all get through it one way or another,” the post read.
Worley & Obetz laid off 45 people in management and administrative roles from its various offices in Pennsylvania and New Jersey on May 21, the statement read.
An additional 60 layoffs were announced four days later after an undisclosed “large customer” notified Worley & Obetz that it was transitioning to a new vendor, the statement continued.
“This is an inconceivable nightmare for everyone. We are doing everything we can to make this less traumatic for our employees. When we discovered the fraud, Seth Obetz immediately liquidated his life savings to keep the company going. We have a solid plan to keep the core of the company going and strongly believe we will come out the other side even stronger and customers will experience limited to no interruption,” the post read. Obetz is vice chairman of Worley & Obetz.
The layoffs came just weeks after the brief disappearance of company CEO Jeff Lyons, the company said.
“Due to potentially fraudulent activity, this has forced us to adjust our operating expenses to keep the company viable. We, of course, provide unemployment opportunity, COBRA coverage and job reference letters as requested,” the post said.
Worley & Obetz reported revenue of $520.5 million in 2015, up from $466.96 million in 2014, according to Business Journal records.
Representatives from Worley & Obetz were not immediately available for comment.
Fulton Financial Corp., Franklin Financial Services Corp. and Univest Corp. of Pennsylvania all said in Securities and Exchange Commission filings last week they will likely lose millions of dollars due to the fraudulent activities of an unspecified borrower.
Representatives from Franklin Financial, however, declined to confirm whether Worley & Obetz was the borrower.
The company is taking a big hit.
Franklin Financial’s subsidiary bank, Farmers and Merchants Trust Co., which operates as F&M Trust, estimates its net income for the second quarter of 2018 will be reduced by between $7.9 million and $9.1 million.
The reduction in net income is due to impairment charges incurred on an aggregate loan participation interest of $14.4 million, according to the filing.
“F&M is not the lead lender and the loan participation interest represents F&M’s portion of loans to a single, large commercial lending relationship with the lead lender,” the filing said.
The lead lender is presumably Fulton Financial, which said in its filing it is “working with the borrower and its owners to preserve and recover assets for the benefit of the corporation and the other participating lenders; however, at this time the corporation is not able to quantify the amount of any additional recoveries that may be realized in excess of what is reflected in the current loss estimate.”
Fulton is taking an even bigger hit.
The Lancaster-based bank estimates that its second quarter 2018 net income will be reduced by up to $32 million.
“As of May 30, 2018, the Corporation’s outstanding credit exposure to the borrower and its related entities was approximately $48 million, which is net of approximately $32 million of participation interests held by other financial institutions,” the filing said.
Representative from Fulton were not immediately available for comment.
Univest also appears to be part of the equation
Univest owns a participating interest of $13 million in a “commercial lending relationship.” It expects to lose all of it in loan and leases losses, according to the filing.
Representatives from Univest were not immediately available for comment.
Editors’ note: This story has been modified from its original version to correct the township where Worley & Obetz is based.